On December 4th of this year, Italy's citizens will vote on a popular referendum to implement some constitutional reforms meant at securing the future of the country's financial and economic stability. A 'Yes' vote will achieve these measures, while a 'No' vote will reject them. In the case of a 'No' outcome, Italy's prime minister Matteo Renzi has promised to step down. A 'No' vote is also seen by many investors as signaling volatility and instability in Italy's financial sector, which could send markets plummeting in the country, and also increase the chances of Italy leaving the European Union (EU) a la Brexit - which could further damage the euro. All of this could be bad news for the euro and European markets, but it could be bullish for Bitcoin. Here is why: (For more, see: Italian Banks’ Future Hinges on December Vote)
Bank Runs and Liquidity Issues
If Italians vote 'No,' there may a rush by its citizens to pull cash out of banks before they fail. The Financial Times has estimated that eight Italian banks may fail in the event of a 'No' vote, banks which are already on shaky ground. As customers rush to pull out their cash, a bank run may ensue, as there may be more demand for deposits than actual money on hand, putting these banks in an even more precarious situation. Banks may stop allowing withdrawals from branches and ATMs, and the resulting lack of liquidity could cause even more troubles. (See also: Basics For Buying And Investing In Bitcoin)
When banks are no longer seen as safe, people may turn to bitcoin to store value, and the demand for bitcoin can send its price higher than the current $765. Bitcoin, being borderless and with no central bank to oversee it would be immune from fluctuations in the Italian economy or a decline in the euro, insofar as it could absorb the new demand.
The Bottom Line
A popular referendum on December 4th may send Italy and the rest of Europe into financial chaos, causing banks to fail and the euro to plunge. Anxious Europeans, fearing a liquidity crisis, could reasonably seek bitcoin as a temporary alternative to conducting commerce and as a store of value until the storm passes.